Disney, McDonald’s talk deal

In an expected alliance between two of the world's premier children's marketing organizations, the Walt Disney Co. and McDonald's Corp. are said to be on the verge of announcing a 10-year pact to co-promote a wide variety of Disney properties....
May 1, 1996

In an expected alliance between two of the world’s premier children’s marketing organizations, the Walt Disney Co. and McDonald’s Corp. are said to be on the verge of announcing a 10-year pact to co-promote a wide variety of Disney properties.

The talked-about deal would redraw the map in the marketing of kids entertainment and in the burger wars over family business.

Details were unconfirmed, but McDonald’s was reportedly prepared to commit annual royalty payments of $100 million for 10 years to lock up the rights to use Disney’s characters from film, TV and home-video properties for its Happy Meal promotions, with as many as 14 to 17 tie-ins per year.

The restaurant chain would also become a major sponsor of the company’s Animal Kingdom theme park in Florida. There was no announcement at press time, and neither company would comment.

The recent talks grew out of an intense bidding war between McDonald’s and Burger King over the rights to tie in to Hercules, Disney’s animated film event for the summer of 1997.

But the seeds go back to 1990, when Disney and McDonald’s had a falling out over marketing for the studio’s Dick Tracy feature. The restaurant chain had also just turned down Beauty and the Beast reportedly because of concerns over the film’s heavy orientation towards females.

There was just too much friction between the two giants, both accustomed to setting their own agendas.

That rift opened the way for Burger King to sweep up the marketing rights to a series of Disney blockbusters, including Beauty and the Beast, Aladdin, The Lion King, Pocahontas, Toy Story and this summer’s The Hunchback of Notre Dame. BK spends upwards of $45 million in advertising these promotions, plus 60 cents apiece for the giveaway toys. Packaging, store decorations and other promotional frills push the total tab for one of these extravaganzas up near $100 million.

But they have proven a solid investment for BK, drawing an avalanche of customers. In its Toy Story promotion last fall, BK gave away 35 million toys plus eight million hastily printed trading cards, and sold another 15 million hand puppets at $1.99.

Kids, of course, bring their parents along, and each Kids Club meal is part of an average bill of around $8.

By holding on to a portion of the incremental business driven by these mega-promotions, Burger King has gained market share.

That’s why McDonald’s, heeding the pleas of its franchisees, basically threw its wallet on the table in the bidding for Disney. Although Burger King knocked itself out on Disney’s behalf, it couldn’t match the money or global clout of its archrival. In the U.S., McDonald’s has nearly twice the outlets that Burger King d’es, almost 12,000 versus 6,600, but its real advantage is overseas, where it has 6,000 stores and is growing fast.

Kids meals tie-ins have been sold on a country-by-country basis, but in recent years, McDonald’s has made an effort to obtain property licenses in worldwide deals. As toy companies go global and international markets mature, licensed properties become more attractive.

‘The kids stuff plays a huge part in that [international] growth,’ says an executive close to McDonald’s marketing efforts.

At the same time, studios like Disney are increasingly interested in rolling out their properties to a global market.

McDonald’s will apparently be tied to Disney exclusively, with perhaps one ‘out’ a year to do a non-Disney property, such as this fall’s Space Jam project from Warner Bros., starring NBA basketball star Michael Jordan.

But outside deals may be subject to a Disney veto.

How smoothly the two companies will work together over such a long period, given their past difficulties, is an interesting question.

Burger King would not comment on the impending deal, but the loss of Disney would be a major blow.

On the plus side, the chain has earned its stripes as a strong marketing partner and would have its pick of all other entertainment tie-ins. And many studios, from Warner Bros. to Fox to DreamWorks, are ramping up their efforts in family entertainment, both in features and on TV.

But, still, there aren’t many properties that can compete with Disney’s in kid appeal. Two of the major films mentioned for next summer, Batman & Robin and The Lost World, a sequel to Jurassic Park, are both likely to carry PG-13 ratings, rendering them off-limits for a kids meal tie-in.

There’s no shortage of other kids properties that might make for successful promotions, but few will be huge traffic-builders in the Disney scale.

Other fast food chains, increasingly playing in the kids meal arena, would also feel shockwaves from the expected Disney-McDonald’s deal. Disney has parceled out its smaller properties to a variety of players: Hardee’s for Homeward Bound II and KFC for its Timon & Pumbaa TV series.

These chains will increasingly be looking to other kids suppliers, including the movie studios, TV players like Saban and Fox Kids, and comic book publishers Marvel and DC.

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